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Interchange Rates

What are 2017 interchange rates? How can merchants reduce fees? The answers are in this handy reference guide updated November 27, 2017. Interchange tables are updated on or about April 15 and October 15 each year. Bookmark this page before clicking links or sign up for Christine’s newsletter for update notifications.

Click links below for the latest interchange rates by card brand, but NOT HOW YOU QUALIFY FOR THEM. The card brands don’t give you this information.

Wells Fargo Payment Network Pass-Through Fee Schedule They removed their Payment Network Qualification Matrix in 2016 on how to qualify for interchange rates, but this 2017 schedule is pretty good source of information. We’ll link to the matrix again if they repost. Even though the Wells Fargo report is the most detailed for merchants ever, it’s still very difficult for a merchant to identify what is the best rate for any given card and transaction type. That’s why dynamic automated interchange management is critical to reducing fees.

American Express does not participate in the interchange system. They have their own rates based largely on SIC code and in some cases, usually very large corporations, specially negotiated deals. American Express merchant fees are published.

Why are fees such as the Discover data usage fee, Nabu fee, and others not listed on the interchange rate sheet? There are theories about this, but we’ll refrain from comment and just state that interchange rates are card dependent, among other factors. The other fees are brand fixed but not card dependent.

What is interchange?
Per MasterCard, it is a “fee paid between the merchant’s bank and the cardholder’s bank that serves to balance costs in the payments system”. Interchange is a component of the merchant discount fee, which merchants pay to accept payment cards. Depending on your price plan, you may or may not see the breakdown of interchange fees within your overall cost of accepting credit card. See our post on What is interchange?

Benefits for these costs paid are fraud protection and faster payment, among others.
All interchange fees are posted on the respective Visa and MasterCard web sites for public viewing. Although there may be interim fee updates, the Interchange Rate Books are release 2X per year- April and October.

Every merchant pays interchange, though the description may vary. For some, the specific interchange rates are broken out on their statements. For others, interchange costs are buried within merchant discount. “Pass thru interchange” is the most cost effective price plan.

Interchange rate qualification:

For every given card and transaction type, there are multiple interchange rates, usually 3-4 for swiped and 3-4 for card not present.

To qualify for different rates, merchants must comply with the related transaction rules.

In some cases, the lowest interchange rate is the same for card not present and swiped, but the rules to qualify for them are different.

Business cards, including Purchasing Cards, have the most complex set of rules; merchants need level 3 processing solutions to potentially qualify for the lowest rates.

A common misconception is that CVV / security codes impact fees. That is FALSE. CVV is for security purposes only and never affects interchange rate qualification.

Each rate below is for the same credit card, but different rules apply to qualify for them.

US MasterCard Select 2014 Commercial Card Interchange Rates

Program

Level 1/ Business Core

Standard

2.95% + $.10

Data Rate 1

2.65% + $.10

Data Rate II

2.65% + $.10

Data Rate III

1.75% + $.10

Large Ticket 1/II/III

1.20% + $40

Interchange management: A system for ensuring various rules are complied with to qualify for the lowest rate possible for any given card and transaction type.

>95% or more of fees paid are non-negotiable interchange, however, interchange rate qualification can be influenced.

A simple way to verify if your transactions are ‘qualifying’ for the lowest rates is to review the interchange rate portion of the merchant statement. Standard (Std), EIRF, Data Rate I and Data Rate II are all easy to spot indicators of a possible problem that an automated interchange management solution can resolve. (Note: Merit I is Ok if key entered and not eligible for other qualified interchange rate such as merit III.)

Pin Debit: For transactions to route to the pin debit networks, the customer must be face to face and enter their pin number on an approved pinpad device.

Regulated debit cards average 65-70% of all debit card transactions. The rate is .05% and $.21 per transaction, plus $.01 extra if issuer qualifies for fraud rate surcharge (which is everyone from what I’ve seen). This rate applies no matter where or how the transaction is processed.

Visa/Mastercard dues and assessments apply to signature debit, but not pin debit. They’re very small fees but add up for high volume accounts.

For non-regulated debit, whether it is cheaper to send via pin or signature debit depends on the amount of the sale. Retail merchants with high volume of transactions in the $10-$30 range would likely benefit from a pin debit optimization solution because low ticket is more expensive with pin debit and high ticket is more expensive with signature debit.

US EMV certifications are very specific- a specific terminal to a specific processor, for a specific set of transaction types; or a payment gateway certification for a terminal to a specific processor, for a specific set of transaction types. Because the certifications are not all alike, the vendor and terminal selection can impact merchant fee qualification. The issuer is in control of the EMV transaction. The interchange rate qualification is dependent, in part, upon certifications. For example, very few have certified for level III processing retail, leaving merchants stuck with higher fees.

There are often reduced interchange rates if certified Cardholder authentication program is in place. This requires registering for the service with the acquirer, and only applies to customer initiated card not present transactions.

Cross border and inter-regional transaction surcharges can sometimes be avoided for multinational companies; rules based routing technology is required.

Paypal Pro Rates Paypal bundles all fees, including interchange, into a single rate, plus a few extras, like 1% surcharge for international transactions (vs .40% cross border fee for interchange plus merchants).